Because Chapter 13 bankruptcy can last anywhere between 3 to 5 years, there are a lot of things that can happen during that time. One of the most common events is the breakdown of an old car and the need to buy a new one. But a debtor in Chapter 13 bankruptcy cannot purchase a vehicle or enter into any other debt contracts without prior approval from the bankruptcy trustee.
Things to Consider When Buying A Car During Chapter 13 Bankruptcy
Here are some things debtors should consider:
- If you purchase a car during your Chapter 13 bankruptcy it will increase your repayment plan obligations. Can you really afford that? Take into consideration that if you are buying a new car or even a used car with a car note, you will need to make your car payment plus any additional insurance required which will be more than what is required for a fully paid for vehicle.
- Will you be able to find financing for a car loan and if you find financing will it be with a reasonable interest rate? Remember, bankruptcy is about reducing your debt and helping you get on your feet financially. The last thing you want to do is to take on a loan with an astronomical interest rate while in Chapter 13 bankruptcy. If you are considering purchasing a car during your Chapter 13 bankruptcy, consider paying cash or even taking out an interest free loan from family and friends if necessary.
- One benefit of purchasing a vehicle during Chapter 13 bankruptcy is that it can go a long way in helping you rebuild your credit. As long as you make payments on time and those payments are reported to the credit bureaus, at the end of your Chapter 13 bankruptcy you will have 3 to 5 years of good credit already reported on your behalf.
Have Any Questions?
If you have any questions regarding bankruptcy we would be happy to answer them. You can submit your questions here or set up a free consultation. We are always here to help.